When things get off track, it's often time to go back to the basics: simple blocking and tackling. When players struggle, coaches will often remind them not to overthink, to go back to what made them successful in the first place. It's a way to get your head straight and to keep it simple. From there, you can re-establish yourself on the solid footing you started with.
When the market gets off track, I am not inclined to go crazy. I want to keep it simple as well. There are a lot of uncertainties in the market. Companies people thought would never disappear are gone or are on the verge of disappearing. In this environment, it makes sense to keep it simple.
The last couple of days have been scary. There's been a lot of bad news in the markets, and the major indices have taken a beating. When choosing a to write about today, I wanted to find one that had weathered the market volatility of the last few days without taking a beating. I also wanted a company that is solid, has withstood the test of time and has a firm foothold in its sector.
is that stock. Almost everyone I know has had a Big Mac, a McDonald's classic. The company has also made additions to its menu to try to hone in on other markets, such as the high-end coffee market. But more than that, I like several of its stats. It has a return on equity of nearly 30%. It's got solid institutional backing of 75%. The forward price-to-earnings ratio is 16.48.
It has revenue of $23.34 billion, with $2.34 billion in the bank and $5.61 billion in operating cash flow. The cash will allow McDonald's to continue to invest in its business in order to grow, even if the market is down or the stock slumps. This is a solid company that will provide me with a good place to put my money. And the stock has been doing well in the last year. It is up 12.83% in the previous 12 months. I understand the concept of "buy low, sell high," but I think this company has room to grow.
Let's also take a look and see how it performed during some of the worst market periods in years. On Friday, the last trading day before the
news broke, the stock closed at $64.06. On Monday, the worst day for the market since the drop after 9/11, McDonald's stock closed at $63.72. The next day, the stock went up a bit, closing at $64.29.
Yesterday, when the market was tackled for another major loss, McDonald's fell too, but only to $62.52. Recently, in early afternoon trading, the stock was trading right around $63. So despite the pain in the market, the stock fell about $1. It never traded below $62.39 during that span.
Everything about this trade, in this market, makes sense to me.
Keep moving the chains!
At the time of publication, Brown had no positions in stocks mentioned, although positions may change at any time.
Tim Brown played 16 seasons in the NFL, where he made nine Pro Bowls. After a brief stint with the Tampa Bay Buccaneers in 2004, Brown retired as an Oakland Raider. He was a Heisman Trophy winner in college for Notre Dame.